April 2011

Rates on U.S. mortgages fell this week, following four weeks of increases, according to Freddie Mac’s weekly survey of conforming mortgage rates, released on Thursday.

The 30-year fixed-rate mortgage averaged 4.8% for the week ending April 21, down from 4.91% last week and 5.07% a year ago, according to the survey.

“Low inflation is keeping mortgage rates at bay,” said Frank Nothaft, vice president and chief economist of Freddie Mac.

Rates on 15-year fixed-rate mortgages also dropped, averaging 4.02%, down from 4.13% last week and 4.39% a year ago.

The 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.61%, down from 3.78% last week and 4.03% a year ago.

And the 1-year Treasury-indexed ARM averaged 3.16%, down from 3.25% last week and 4.22% a year ago.

To obtain the rates, the fixed-rate mortgages required payment of an average 0.7 point, while the ARMs required an average 0.6 point. A point is 1% of the mortgage amount, charged as prepaid interest.

In closing – although housing starts and existing home sales in March were stronger than the market consensus, they were still at low levels. Moreover, home builders reportedly became more pessimistic in April about the near-term according to the NAHB/Wells Fargo Housing Market Index.

Distressed homes – typically REOs and short sales – accounted for 40 percent of the existing homes sold in March, the National Association of Realtors (NAR) reported Wednesday.

The trade group notes that these properties generally sell at discounts in the vicinity of 20 percent. Their large market share served to dampen the median existing-home price. For all housing types, it came in at $159,600 last month, down 5.9 percent from March 2010.

Overall, sales of previously owned homes rose 3.7 percent last month as the spring buying season began to take hold. NAR described March’s reading as “continuing an uneven recovery,” following the 9.6 drop recorded in February.

“Existing-home sales have risen in six of the past eight months, so we’re clearly on a recovery path,” he said. “With rising jobs and excellent affordability conditions, we project moderate improvements into 2012, but not every month will show a gain – primarily because some buyers are finding it too difficult to obtain a mortgage.”

“For those fortunate enough to qualify for financing, monthly mortgage payments as a percent of income have been at record lows,” Yun added.

The March numbers put the annual sales rate at 5.10 million in March, up from a revised 4.92 million in February, but below the 5.44 million pace in March 2010.

NAR notes that sales were at elevated levels from March through June of 2010 in response to the federal homebuyer tax credit. Immediately following its expiration, existing-home sales bottomed last July, and been on a slow but fairly steady path ever since.

“Although home sales are coming back without a federal stimulus, sales would be notably stronger if mortgage lending would return to the normal, safe standards that were in place a decade ago – before the loose lending practices that created the unprecedented boom and bust cycle,” Yun said.

He says given that the Federal Housing Administration (FHA) and Veterans Affairs (VA) government-backed loan programs turned a modest profit over to Treasury last year, and have never required a taxpayer bailout, low down payment loans should continue to be made available for consumers who have demonstrated financial responsibility.

A parallel NAR practitioner survey shows first-time buyers purchased 33 percent of homes in March, compared with 34 percent in February. They were 44 percent in March 2010.

All-cash sales were at a record market share of 35 percent last month, up from 33 percent in February and 27 percent in March 2010.

Investors accounted for 22 percent of sales activity in March, up from 19 percent both the month before and a year earlier.

Being that yesterday was Tax Day, we figured we all could use a good laugh. Nothing serious this week – just a good chuckle or two. Next time you are stumped trying to find just the right euphemism for a, well, unique quality of a new home on the market, please consult the list below:

• Old charmer – just an ugly old house

• Stunning house – the house is not ugly

• Tudor – two bedrooms are in the attic which is not insulated; very hot in summer and very cold in winter

• Cape Cod – styled after Third World slum dwellings

• Sunny corner lot – noisy intersection of two busy streets

• Easy freeway access – noisy arterial street close to freeway

• Low maintenance lot – no yard; the kids will have to play in the street

• Meticulously maintained in the original condition – the appliances are 50 years old

• Ready to remodel – the house is about to collapse; double-check it’s not already condemned

• Newly remodeled kitchen – 50-year old cabinetry and faucets have been replaced with cheap modern equivalents

• Motivated sellers – seller is behind on their mortgage payments

• Ready to move in – the interior has been painted with one coat of cheap paint

• Desirable neighborhood – this little house is extravagantly overpriced because the neighborhood has a snobbish reputation

• 1-car garage – you can fit a Ford Escort into the garage, but there is no room to open the doors

• In-city living – it is not safe to walk in this neighborhood after dark

• Recreation room with wet bar – basement has been painted and has a faucet

• Large family room – large basement

• Bedroom in basement – basement has a 1′ by 2′ window

• Lots of storage space – basement too small to be called a family room

• Partial mountain view – you can see the tip of Mt. Baldy if you climb onto the roof

• Views of wildlife – good view of your neighbor’s bedroom window

• Build sweat equity – the house is not habitable

• Needs a little TLC – plan on renting a bulldozer

• Storybook – the house is old and the roof is not flat

• Efficiently designed kitchen – the kitchen is too small to fit two people at the same time

• Great water pressure – the house is next to a water tower

• Quiet neighbors – the home backs to a cemetery

• Cozy bathroom – you can shower while sitting on the toilet

• Won’t last! – hurry and place an offer before the bank forecloses

• Unique – it’s weird, just weird

We like to laugh a lot at Raj’s office – thought you would like this too.

A sluggish real estate market hasn’t shaken the confidence of the public in how it views home ownership, according to a new study by the Pew Research Center. Eight in 10 adults (or 81 percent) say owning a home is the best long-term investment a person can make, according to the Pew study of about 2,000 adults conducted in March.“Home owners are not blind to what has happened to home prices, nor are they expecting a speedy recovery,” according to the Pew study. In fact, of the home owners surveyed, about half said their home is worth less now than before the recession, while 31 percent said their home’s value has stayed the same.Nevertheless, 82 percent of home owners who say their home is worth less now than before the recession either strongly or somewhat agree that home ownership is the best long-term investment a person can make, according to the survey.The value of home ownership even continues to emerge on top when home owners were surveyed and asked to rate the importance of four long-term financial goals. Home ownership and “being able to live comfortably in retirement” rated the highest–viewed as either extremely or very important by 80 percent of respondents.Yet, their optimism about home ownership doesn’t mean they’re completely happy with their current home. Nearly a quarter of all home owners surveyed said that if they had it to do all over again, they would not buy their current home. Most of the “buyer’s remorse” complaints were about the home itself or its location. Only 31 percent of those surveyed cited financial factors, such as the home losing value or their own changing financial situation.

Selling a home during this real estate downturn can be stressful on the seller. It’s not unusual for some homes to sit on the market for months on end, and many areas are still working through a backlog of foreclosure inventory, which also drives down home prices. Fact: 36 percent of homes nationwide sold for a loss in January. As we enter spring’s home shopping season, buyers are in the driver’s seat in many markets, and they know it. That’s why if you’re planning on putting your home on the market, it’s crucial to understand the time-honored mistakes sellers make, and how to avoid them.

Pricing for yesteryear
Nationally, home values have fallen 27 percent since the market peaked in 2006. In some markets, total declines are in the 50-60 percent range. Yet, many sellers are tempted to list their home for sale based on what they paid for the home, not on their area’s current market conditions. If you set a price too high, your house will sit. This will inevitably lead to price reductions, which could signal to buyers there is much more room for negotiation.

Tip: Arm yourself with information on comparable home sales, price reductions in your area, and find out how long homes are typically on the market. Then you can have an informed discussion with your agent about the appropriate price for your home, given local market conditions.

Focusing on comps
Don’t concentrate solely on the recent sales of homes in your area. Make sure you look at the listing price for homes that are on the market right now. These homes are your competition. Based on your competition, would a potential home buyer think they are getting a good deal on your home, or theirs?

Tip: Go see the all the homes in your neighborhood. Ask your agent what current buyers are looking for in a home these days and ask yourself objectively how your home stacks up against the competition.

Hiring the right agent
Choosing the right agent (aka –> @RajQsar) is a crucial part of the selling process. You need to find someone who demonstrates knowledge of your area, expertise in the process, and strong marketing skills. You also want to make sure your communication styles mesh. Yet, many people just hire someone based on one friend’s recommendation and wind up frustrated during the process.

Tip: Before choosing an agent, do some research online. Knowing the experience several people have had with a particular agent will help you make a more informed decision. Make sure to interview at least three agents before making a final decision.

Limiting your marketing exposureReal Estate is often thought of as a local business, but when marketing your home it’s essential to think broadly. Limiting your exposure to a few local web portals makes it hard for home shoppers to find your listing.

Tip: Make sure your agent is active on the top online home shopping websites and has experience using technology to market your home (e.g., Twitter, Facebook, YouTube & more). Even if you aren’t active online, 90 percent of buyers use the Internet to search for a home, according to National Association of Realtors. Don’t forget to use your own social networks to build online buzz.

Ignoring web appealWhen marketing your home online, display as many photos of your property as possible. Help buyers visualize themselves in your space by posting lots of interior shots. Focus on what people care about, namely, the kitchen, living spaces, and even the bathrooms. Make sure to clean up and de-clutter, it’s amazing how many messy rooms are shown in listing photos. And remember — as more and more people use mobile apps to shop for homes — 23 million homes are viewed on mobile apps each month (that’s nine homes per second) — the quantity and quality of photos matter. High-resolution is best.

Tip: Ask your agent what kind of camera he or she plans to use when photographing your home. Make your main display photo the one that best represents your home.

Don’t follow buyers around when showing
Whenever possible, don’t be home when showing. Lurking sellers make buyers nervous — they don’t feel comfortable inspecting the house when they feel like they’re being watched. It’s easier for buyers to visualize the home being theirs when they have a chance to critique and discuss the home among themselves.

Tip: Unless there’s a real reason for it, don’t ask your agent to be present for all showings. Other agents want privacy with their buyers and they don’t usually have time to work around your agent’s schedule.

If you haven’t been to Full Circle Yoga yet, now’s the time! You are invited to our 1st Anniversary Open House THIS Saturday, April 9th from 1-4pm. Refreshment, music, chair massage, and 20 minute mini-lessons in yoga, tai chi, meditation and more will be offered throughout the day. Come as you are; no RSVP necessary! If you like what you see, we have special Anniversary Discounts– up to 25%– on all class passes.

Please see the attached PDF flyer or go to our website for the schedule and festivities of the day.

P.S. Feel free to share this with someone who could benefit from what we provide. Share the health!

Foreclosures continue to flood real estate markets across the country, and buyers are looking to cash in on what they view as some of the best real estate deals. But experts say that while some foreclosures are a great purchase, buyers need to be cautious before jumping in to make sure they really are getting a bargain.

Dan Steward, president of Pillar to Post Professional Home Inspections, advises buyers considering a foreclosure to avoid the following:

1.Don’t judge a house by looks alone. A $2 million mansion may look fabulous but have mold hiding beneath the walls or need numerous, costly repairs. A fixer upper, on the other hand, may look rundown but have excellent bones and can be repaired at a reasonable cost. A home inspection prior to purchasing a property can help buyers determine if they might be getting in over their head, Steward says. He cautions buyers to not just rely on previous inspections, however, since vacant homes can deteriorate rapidly.

2.Don’t focus on price alone. Buyers may focus on the ultra-low price so much that they forget to factor in other qualities, such as the home’s school district, view, location, and crime rate. Steward cautions buyers to not assume that financial problems of the previous owner are the main reason for every foreclosure.

3. Don’t be tempted to “flip.” Purchasing a home at bargain price, updating it, and then trying to sell it for a lot more may seem tempting, but Steward warns buyers to be cautious. Unless the buyers are pros at house flipping, they’ll likely run into several novice mistakes in trying to make fast money on flipping a foreclosure. Steward recommends buyers consult a real estate professional, home inspector, and contractors before considering a flip.

4.Don’t go over budget. Foreclosures often require some fixes so buyers need to make sure they have the money to afford needed repairs. Steward recommends that buyers have at least half of the money in cash for needed repairs. He says that buyers will want to avoid taking more loans than needed, particularly private loans, because the interest on them will slowly chip away at their initial foreclosure bargain.

Should residential appraisals use distress sales as comparables? It’s a thorny question that some states are weighing.

In a recent Realty Times article, the author notes that in a normal market using distress sales as comparables is often viewed as inappropriate because such sales are unusual and do not represent the standard market.

However, nowadays in many markets, distress sales may comprise 30 percent to 40 percent of current sales activity and may be impossible to ignore.

Four states are considering laws that would affect how appraisers should consider the sale of distressed properties. Here’s a breakdown of legislation those states are considering:

Illinois: A proposed law says that an appraiser may not “use as a comparable sale the sale price for a residential property that was sold at a judicial sale at any time within 12 months after the date of the judicial sale… .” The Illinois law would sunset after five years, according to the Realty Times article.

Missouri: Legislation says that appraisers must comply with the Uniform Standards of Professional Appraisal Practice (USPAP), but not in cases when a property has been foreclosed. “An appraiser shall not utilize the foreclosure price as a comparable property when developing an appraisal,” the legislation states.

Maryland: The proposed law is somewhat vague, but it says in cases of duress or unusual circumstances “such as a foreclosure sale or short sale,” the appraiser is to “consider” the property’s history (e.g. whether it’s being sold at auction or as a short sale) and “consider” the seller’s motivation, such as if the home owner was seeking to avoid foreclosure.

Nevada: A pending law covers both short sales and foreclosures: “Except as otherwise required by federal law or regulation, an appraiser shall not include as a comparable sale in an appraisal a short sale or a sale of property which was the subject of a foreclosure sale.”

Appraisers are required to comply with the Uniform Standards of Professional Appraisal Practice guidelines for weighing comparables in federal transactions, which “mandates that appraisers must analyze such comparable sales as are available. Further, the standard cannot be voided by a state or local government.” That said, a recent article at Appraiser News Online raises the issue that appraisers have a difficult decision to make when their state has different regulations than USPAP when it comes to weighing distressed sales.

As home values fell and unemployment rose, an increasing percentage of homeowners opted to make their credit-card payments before their mortgage payments — a trend that has been occurring for about three years, according to TransUnion, a credit reporting company. But that may be changing.

A TransUnion study released this week found that the percentage of consumers who remained up to date on their credit cards but were delinquent on their mortgages reached as high as 7.4% in the third quarter, up from 4.3% in the first quarter of 2008. However, the percentage dropped to 7.24% in the fourth quarter, TransUnion reported. Traditionally, consumers make their mortgage payments the priority, so as not to default on their loan and possibly face foreclosure.

The reversal of the traditional payment hierarchy was driven in large part by home-value depreciation and rising unemployment, both of which speak to consumer willingness and ability to pay their mortgages versus their credit cards. Home-value concerns and stubbornly high unemployment continue to drive this dynamic, though the decline in the number of consumers delinquent on mortgages and current on credit cards may be a sign that the divergence in the payment hierarchy has peaked.

As the job market improves and housing values stabilize, the thinking is that more consumers will revert to a traditional order when it comes to their monthly financial obligations: They’ll pay their mortgages before their credit cards. But the return to a “traditional payment hierarchy” will most likely be gradual.

Though we saw the first decline in the number of consumers who are delinquent on their mortgages and current on their credit cards in the most recent quarter, the percentage of people in this position still remains more than 72% higher than it was at the beginning of the Great Recession.

World events affect your mortgage rate

As world events dominated the news in recent weeks, mortgage rates enjoyed a reprieve from a climb that began late last year, keeping the 30-year fixed-rate mortgage down below 5% at the start of what is traditionally the home buying and selling season.